New Zealand: Selected Issues

IMF Staff Country Reports, September 20, 2019

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New Zealand: Selected Issues

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Bibliographic details

• Published: September 20, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781513514765.002

Executive summary and main findings

• The paper analyzes interactions between external risks and the New Zealand economy.
• The current set of external risks "has the potential to be extremely damaging to New Zealand."
• Two mitigating factors are identified:
  • The flexible exchange rate regime is a reliable shock absorber and automatic stabilizer from the perspective of GDP, but it leads to a rebalancing between the domestic and external sectors in the economy.
  • Net migration flows can reduce the negative impact of lower external demand under some circumstances, such as a growth slowdown in Australia.
• Fiscal policy could offset some of the short-term costs of adjustment:
  • Fiscal policy can provide stimulus at relatively small and manageable cost to the already-low government debt to GDP ratio.
  • At the current juncture, fiscal policy might need to provide the bulk of policy support against negative shocks, because monetary policy might be ineffective if it has become constrained by an effective lower bound on the monetary policy interest rate.

Policy analysis and implications

• Exchange rate policy:
  • Flexible exchange rate regime functions as an automatic stabilizer for GDP.
  • The exchange rate response implies a rebalancing between domestic and external sectors.
• Migration:
  • Net migration flows can play a countercyclical role by mitigating negative external demand shocks in some scenarios (example given: Australian growth slowdown).
• Fiscal vs. monetary policy:
  • Fiscal policy is positioned to provide stimulus with limited cost given an already-low government debt to GDP ratio.
  • Monetary policy effectiveness may be limited if constrained by an effective lower bound on the policy interest rate, increasing the role for fiscal policy.

Subject areas and keywords covered

• Subjects: Consumption, Financial sector policy and analysis, Financial sector stability, Income, Macroprudential policy, Migration, National accounts, Population and demographics
• Keywords: Consumption, Consumption-equivalent welfare index, CR, Financial sector stability, Global, Income, income growth, ISCR, living standard framework, Macroprudential policy, Migration, monetary policy, price, welfare advantage, wellbeing indicator

Publication metadata and key statistics

• Publication title: New Zealand: Selected Issues
• Publication date: September 20, 2019
• Pages: 47
• Volume: 2019
• Issue: 304
• Series: Country Report No. 2019/304
• DOI: https://doi.org/10.5089/9781513514765.002
• Stock No: 1NZLEA2019003
• ISBN: 9781513514765
• ISSN: 1934-7685
• Citation format example provided on page: International Monetary Fund. Asia and Pacific Dept "New Zealand: Selected Issues", IMF Staff Country Reports 2019, 304 (2019), accessed 9/10/2026, https://doi.org/10.5089/9781513514765.002

Source: "New Zealand: Selected Issues", IMF Staff Country Reports, September 20, 2019.

Content in this bundle

• New Zealand: Selected Issues; IMF Country Report No. 19/304; September 5, 2019
  • New Zealand: Selected Issues; IMF Country Report No. 19/304; September 5, 2019 (Markdown version)
  • New Zealand: Selected Issues; IMF Country Report No. 19/304; September 5, 2019 (PDF)